Introduction
If you asked most investors to name an exciting investment opportunity, frac sand would not appear on many lists. It is an industrial commodity business tied to oil and gas drilling. Small, illiquid, and thoroughly unglamorous. Which is exactly why TVISIL found it interesting.
Smart Sand (NASDAQ: SND) is a producer of high-quality Northern White frac sand used in oil and gas well completions. When TVISIL’s cheap-asset screen first flagged it, the stock was trading at a significant discount to the replacement cost of its core assets. The result across multiple campaigns: returns ranging from +89% to +142%.
What Is Smart Sand?
Smart Sand mines, processes, and sells Northern White frac sand – a premium grade of silica sand used in hydraulic fracturing of oil and gas wells. Northern White sand is considered superior to lower-grade alternatives because of its roundness, strength, and permeability characteristics, which help maximise oil and gas recovery per well.
The business is asset-heavy: it owns and operates sand mines and processing facilities in Wisconsin, with significant capital embedded in proven reserves, rail infrastructure, and processing capacity.
What the TVISIL Screen Found
Large discount to asset replacement cost: The cost of building equivalent sand reserves, mining infrastructure, and processing facilities from scratch was substantially higher than what the market was implying in Smart Sand’s share price. An acquirer buying the whole company would be getting the assets at a fraction of their replacement value.
Manageable balance sheet: Smart Sand had navigated the 2019-2020 frac sand market downturn and was operating with a balance sheet that gave the business enough runway for a cyclical recovery to play out.
Insider alignment: Management was buying back shares at prices the company itself considered cheap – a meaningful signal of confidence when combined with asset cheapness.
Market pricing in permanent impairment: The frac sand market had been through a brutal period of oversupply and price compression. The market was pricing Smart Sand as if Northern White sand would never again earn a reasonable return on assets. TVISIL’s process does not require forecasting exactly when a cycle turns – only that the asset value is real and the balance sheet gives you time.
The Outcome
TVISIL ran multiple successful campaigns in Smart Sand across different market phases, with documented returns ranging from +89% to +142% on individual trades. Every position is documented in the TVISIL historical portfolio with separate entry and exit dates for each campaign, dividends or distributions received, and final percentage return on each trade.
The Lesson
Smart Sand shows why cheap-asset investing across cycles is powerful. The business was not sexy. The industry was not fashionable. The near-term news flow was not positive. But when a company’s assets are worth substantially more than its market price and the balance sheet gives you time, the market eventually closes the gap.
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TVISIL is an educational model portfolio. Not personalised investment advice. All investing involves risk. Past performance does not guarantee future results.